Samsung seeks $1B bond to expand Texas processor plant

Samsung is in talks with banks to acquire $1 billion to fund an expansion at its facility in Austin, Texas that is said to be the source of A5 processors powering the iPad 2 and iPhone 4S, and could possibly be the factory responsible for Apple's next generation A6 chip bound for the rumored iPad 3.

The South Korean electronics maker revealed on Monday that it will issue its first overseas bond since 1997 to fund an expansion at its Austin plant that produces processors used in mobile devices, including those used in many of Apple's mobile products, reports Businessweek.

According to spokesman James Chung, Samsung has filed proposals to multiple banks to borrow up to $1 billion in five-year maturity bonds issued by the company's U.S. arm.

The company's logic-chip business, which currently oversees the production of Apple's A4 and A5 processors that power the iPhone and iPad lines of mobile devices, may double spending to 8 trillion won (about $6.95 billion) in 2012. It is unclear whether the boost in manufacturing capability is for the company's own mobile devices or to handle demand for an as yet unannounced chip that will power the rumored next generation iPad.

Samsung's Austin plant reached maximum capacity in October 2011, just as smartphone shipments saw a year-to-year increase of 44 percent according to Strategy Analytics Inc.

Samsung's Austin, Texas Plant | Source: Samsung

The South Korean company's handsets are seen as direct competition with Apple's iPhone business and posted record earnings earlier this month, with profits hitting $4.5 billion in the December quarter riding on an estimated 32 million smartphone sales.

As of Sept. 30, 2011, Samsung had over $19.2 billion in cash and equivalents according to Bloomberg. An estimate from Korea Investment &amp; Securities Co. says the company's operating profit most likely doubled in 2011 and may grow 82 percent in 2012.

Apple and Samsung have been tangled in a worldwide patent dispute since April 2011 when the Cupertino, Calif., company filed a suit alleging the South Korean company blatantly copied the look and feel of the iPhone and iPad. Most recently the Galaxy phone and tablet maker was denied a preliminary injunction against the iPhone 4S in Italy.

All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.

All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.

can't you do anything about it?

i'm here because i wan't something about apple, not about the current copycats and microsoft. they don't matter.

All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.

AI has always written stories that involve Apple even if it's about competitors to Apple. Samsung just happens to be one that has set it self up in the last year to be more directly compared.

This bot has been removed from circulation due to a malfunctioning morality chip.

Samsung may not build any more of Apples' SoC because of their legal battles. Is this their way to force Apple to keep the contract, to avoid the bad publicity of americans losing their jobs if Samsung is forced to close the fabric?

All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.

Let's say you wanted to buy a house and you actually had enough cash. Well, the interest for a 15-year fixed mortgage is 3.22%. Meanwhile the S&P 500's average annual return (calculated since the 1950s) is 11%.

You're better off getting a loan for your house; your down payment would need to be large enough to avoid PMI but the rest of your cash would be more productive in other investments. Plus, you can write off mortgage interest come tax time. Sure, you will need to pay some taxes on the interest or dividends earned from your investments, but these are generally taxed at a lower rate than wages.

2) Samsung can make more interest on its cash holdings than it would have to pay in interest for the loan.

(1) is a truism, but if (2) were true, consider that Samsung could make more money for its shareholders by financial engineering, i.e., levering up to the hilt, rather then producing and selling stuff.

Let's say you wanted to buy a house and you actually had enough cash. Well, the interest for a 15-year fixed mortgage is 3.22%. Meanwhile the S&P 500's average annual return (calculated since the 1950s) is 11%.

You're better off getting a loan for your house; your down payment would need to be large enough to avoid PMI but the rest of your cash would be more productive in other investments. Plus, you can write off mortgage interest come tax time. Sure, you will need to pay some taxes on the interest or dividends earned from your investments, but these are generally taxed at a lower rate than wages.

See above. It's not so simple. You have to be highly confident that (a) your home value will continue to rise, and (b) you can get high returns on the alternative investment.

Both are pretty strong assumptions, as history would tell us. It can be a fools' game to borrow at one level of risk and lend at another (unless you're a bank, but even then......)

See above. It's not so simple. You have to be highly confident that (a) your home value will continue to rise, and (b) you can get high returns on the alternative investment.

Both are pretty strong assumptions, as history would tell us. It can be a fools' game to borrow at one level of risk and lend at another (unless you're a bank, but even then......)

Of course it's not simple. That said, if you have a diversified investment portfolio and spread the risks, there's a decent likelihood of increasing your wealth over the long term.

Today, I don't tell anyone that real estate is a good investment and heck, I live in Silicon Valley where the market is pretty resilient because engineers are in high demand, regardless of what the current unemployment rate is. (No, I am not an engineer.)

A house is a home and there are a lot of emotional attachments that come into play versus buying a bunch of SPY, IWM or QQQ.

But my point stands: it is often cheaper to use someone else's money than your own. You just have to run the numbers, assess the risk, and decide if it's worth it.

It may surprise many of you. but when it comes to the BOTTOM LINE, fanboyism is OUT THE WINDOW.

Samsung knows that ios devices sell ridiculously well so they rely on apple for that business.

Apple knows that Samsung has some of the best facilities for the manufacture of their specialized hardware and wouldn't trust some back alley chinese manufacturer with their product reputation.

Same with google. Apple will never black youtube and youtube will never block apple cause really they are also dependent.

If the top executives acted like people who frequent forums such as this one and many others their companies would be vastly smaller than what they are. Sure, sue them in the competition sphere, but that is completely separate form other business relationships, and both companies are well aware of that.

All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.

Since the injuction being lifted Samsung is slamming their Galaxy Tab 10.1 ads all over Australian TV eg. especially with Australian Open tennis on now.

The one with the guy wearing goggles filming horses with a Tab while driving along them... Careful not to drop it...!

But like I said, I'm okay with this website having Samsung/Android news, I'd like to keep up to date with what's happening there, and again since I've reduced my anti-Samsung stance this year (to the best of my ability, but, boy, that ad does irk me somewhat).

I remain of the opinion that Android does borrow many elements of iOS. I know it's been debated to death, so let it be, it's what everyone has to deal with it, I'm not sure if the litigation will stick because there's too many lawsuits flying around and by the time they are resolved, just like Windows, Android would have diverged enough from iOS. Or so I think.

Again, trying to stay more neutral here, but it is hard.

Can someone who owns a Galaxy Tab 10.1 and Galaxy S2 actually post some information on your experiences? I think it's okay, we should keep an open mind.

In any case it looks like Samsung will have significant profit growth in 2012.

Samsung may not build any more of Apples' SoC because of their legal battles. Is this their way to force Apple to keep the contract, to avoid the bad publicity of americans losing their jobs if Samsung is forced to close the fabric?

Yeah, I was thinking the same thing. I've always been bothered as to why Apple doesn't buy those chips from a Japanese, Taiwanese or Chinese manufacturer. Apple should file a lawsuit or at least lobby so that Texas doesn't grant Samsung the expansion of their factory or shut it down on the grounds that Samsung is a company that manufactures stolen IP products. If they don't I can see angry androidfans blaming Apple when Apple changes their chips to a better and cheaper supplier in China.

Yeah, I was thinking the same thing. I've always been bothered as to why Apple doesn't buy those chips from a Japanese, Taiwanese or Chinese manufacturer. Apple should file a lawsuit or at least lobby so that Texas doesn't grant Samsung the expansion of their factory or shut it down on the grounds that Samsung is a company that manufactures stolen IP products. If they don't I can see angry androidfans blaming Apple when Apple changes their chips to a better and cheaper supplier in China.

At this point I think it's clear how important Samsung still is to Apple. If they could have switched suppliers Apple would definitely have done it by now. But as aggressive as Samsung is with their own products, they must clearly still be delivering the supplies and gear that Apple needs for their assembled products.

Especially when Steve was alive, I mean, 10 years ago he would have just obliterated Samsung from everything Apple. But even in 2010-2011 while Steve was alive, and even now, Apple has kept buying a very large amount of supplies from Samsung. There must be a reason for this.

It is unclear whether the boost in manufacturing capability is for the company's own mobile devices or to handle demand for an as yet unannounced chip that will power the rumored next generation iPad.

Well, if they are talking about getting a loan it will not be for a product that they should already be producing (as the iPad 3 is not that far away, presumably). Between the loan and the actual production capacity are years, not months or weeks.

What we can assume is that it is generic production capacity. After all, a chip is a chip more or less production wise. Such direct links between a product (A6) and capacity do not exist, really.

But form an AI perspective, some link with Apple was needed, I suppose.

At this point I think it's clear how important Samsung still is to Apple. If they could have switched suppliers Apple would definitely have done it by now. But as aggressive as Samsung is with their own products, they must clearly still be delivering the supplies and gear that Apple needs for their assembled products.

Especially when Steve was alive, I mean, 10 years ago he would have just obliterated Samsung from everything Apple. But even in 2010-2011 while Steve was alive, and even now, Apple has kept buying a very large amount of supplies from Samsung. There must be a reason for this.

Samsung invests heavily on their manufacturing capacity. Apple isn't using Samsung because their products are more advanced or cheaper, they are using Samsung products because they just make them faster. Apple has been investing money into other manufacturers so they can increase their manufacturing capacity. I'm sure Apple will move away from Samsung when their trusted and reliable manufacturers who don't steal have the capacity to deliver on time Apple's orders. It's like two restaurants who compete for customers and restaurant A serves cooked food from restaurant B, but obviously restaurant B had stolen the recipe from restaurant A.

Yeah, I was thinking the same thing. I've always been bothered as to why Apple doesn't buy those chips from a Japanese, Taiwanese or Chinese manufacturer. Apple should file a lawsuit or at least lobby so that Texas doesn't grant Samsung the expansion of their factory or shut it down on the grounds that Samsung is a company that manufactures stolen IP products. If they don't I can see angry androidfans blaming Apple when Apple changes their chips to a better and cheaper supplier in China.

Texas doesn't care about stolen IP, nor would any other state. They care about jobs. Don't be surprised if they even throw in some cash. This is how large corporations act now. Threaten to move jobs unless public money is 'invested' into the 'partnership'. The auto industry has been doing this for years now. This is modern capitalism.

All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.

Why the hate? Relax.

Like it or not, Samsung is an integral part of Apple.

Whats funny is that a South Korean company contributes to infrastructure and helps grow US GDP, while an American company helps communist China's GDP.

That Samsung plant has been in Austin, Texas since 1996, back when I went to school at UT Austin.

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"Like I said before, share price will dip into the $400." - 11/21/12 by Galbi

Well mainly because there is no one else to buy from. You can count the number of fabs that can possibly meet apple's demand on one hand:

Samsung
TSMC
GlobalFoundries
Intel

Of those, Intel is not interest in making ARM chips without some of their IP. TSMC and GlobalFoundries have had yield issues to the point of having to cancel an entire node. That really only leaves Samsung.

That's the sad thing that Intel is going to regret down the line. This is the perfect opportunity to fab massive amounts of chips for Apple. If they can suck it in that Apple got "smarter" than them. In the end pride may hobble Intel. It's still absolutely unbeaten in laptop and desktop-class chips, because, like you note, TSMC and Global Foundries just haven't matched Intel.

Intel's fabbing at every lower nodes is ahead of TSMC and Global Foundries, at least for powerful laptop and desktop CPUs. AMD/ATI/Nvidia who use TSMC and Global Foundries just haven't been able to keep up with Intel in terms of chip production.

Again, if Intel actually partnered or bought Nvidia, they would be in a very capable position, but pride made them miss the boat.

To me, it's quite simple for the consumer. Intel make excellent CPUs. Nvidia and ATI make good GPUs. Forget ATI for Intel because it's AMD. So Intel, buy Nvidia. Integrate their tech, into your CPUs. Guess what, I reckon Nvidia-developed GPUs on the same die as Intel CPUs would be insanely powerful.

Next, Intel, just suck it up and fab Apple's ARM. You might learn a thing or two. (Then again, Intel may rip off Apple, but I'm sure they could easily make their own lines).